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Study: Most student loan fraud claims involve for-profits

By Maria Danilova Associated Press

Wednesday, Nov. 22, 2017 8:25 PM

FILE - In this July 8, 2014 file photo, an Everest Institute sign is seen in a office building in Silver Spring, Md. Students who attended for-profit colleges filed more than 98 percent of the requests for student loan forgiveness alleging fraud by their schools, according to an analysis of Education Department data published Thursday, Nov. 9. (AP Photo/Jose Luis Magana, File)

FILE - In this Sept. 7, 2017, file photo, Education Secretary Betsy DeVos speaks at George Mason University Arlington, Va., campus. Students who attended for-profit colleges filed more than 98 percent of the requests for student loan forgiveness alleging fraud by their schools, according to an analysis of Education Department data published Thursday, Nov. 9. (AP Photo/Jacquelyn Martin, File)

WASHINGTON – Students who attended for-profit colleges filed more than 98 percent of the requests for student loan forgiveness alleging fraud by their schools, according to an analysis of Education Department data published Nov. 9.

The study by The Century Foundation represents the most thorough analysis to date of the nearly 100,000 loan forgiveness claims known as borrower defense received by the agency over the past two decades and paints an alarming picture of the state of for-profit higher education in America. The study was provided to The Associated Press ahead of publication.

The report comes as Education Secretary Betsy DeVos faces criticism for halting two Obama-era regulations that would have added protections for students. Review of tens of thousands of claims has stalled and the AP reported last month that the department now is considering abandoning the practice of full loan cancellation in favor of partial forgiveness. Student advocates point to the Trump administration’s ties to the for-profit industry and accuse DeVos of putting industry over students.

The study found “a disproportionate concentration of predatory behavior among for-profit colleges” that raises “serious concerns about the federal government’s current approach to providing relief to students who have been defrauded and misled.”

The Education Department said it needs to review the report before commenting.

Of the more than 98,800 complaints received by the department as of mid-August, 98.6 percent came from students at for-profit schools, while only 1.4 percent of them were filed by those who attended nonprofit institutions. For-profit schools account for only 10 percent of national enrollment and 18 percent of federal student debt, according to government data.

More than 75,000, or 76 percent, of claims came from students who attended the now-shuttered Corinthian schools, followed by more than 7,300 students from the ITT Technical Institute chain, as well as students from American Career Institute, the Education Management Corporation and others. The Century Foundation received the data through a Freedom of Information Act request.

“The for-profit college industry scams students across the country and taxpayers and that’s why the industry, including industry insiders who are now staffing the Department of Education, is now fighting so hard against rules that would clarify the borrower defense process,” said Toby Merrill, director of the Project on Predatory Student Lending at Harvard University, a legal services clinic that represents defrauded students. “If for-profit schools don’t want to be responsible for borrower defense claims and reimbursing taxpayers, then they could simply not cheat their students.”

Steve Gunderson, president of Career Education Colleges and Universities, the industry lobbying group, dismissed the report as an attack on the industry. He suggested that the Obama administration was to blame for the influx of borrower-defense claims from for-profit college students.

“It doesn’t surprise me that the Century Foundation issued a report suggesting for-profit colleges are to blame for borrower defense claims. Look no further than the Obama Administration’s destruction of ITT Tech and Corinthian,” Gunderson told the AP in a statement. “This report confirms what we’ve long known: There are dozens of groups coordinating their efforts to destroy our sector.”

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Study: Most student loan fraud claims involve for-profits

FILE - In this July 8, 2014 file photo, an Everest Institute sign is seen in a office building in Silver Spring, Md. Students who attended for-profit colleges filed more than 98 percent of the requests for student loan forgiveness alleging fraud by their schools, according to an analysis of Education Department data published Thursday, Nov. 9. (AP Photo/Jose Luis Magana, File)

FILE - In this Sept. 7, 2017, file photo, Education Secretary Betsy DeVos speaks at George Mason University Arlington, Va., campus. Students who attended for-profit colleges filed more than 98 percent of the requests for student loan forgiveness alleging fraud by their schools, according to an analysis of Education Department data published Thursday, Nov. 9. (AP Photo/Jacquelyn Martin, File)